Norway's carbon storage plans hinge on EU
The oil-rich Scandinavian kingdom is hoping to build on a decade of experience at its Sleipner offshore platform in the North Sea to launch a test plant that would bury CO2 emissions from a gas-fired power station inland. But EU state aid rules are frustrating its ambitions.
Carbon capture and storage (CCS) is a method whereby CO2 released during extraction (pre-combustion) or burning (post-combustion) of fossil fuels is captured and stored in underground geological formations.
The technology is seen as crucial to reducing the global warming impact of fossil fuels such as coal and gas, on which the International Energy Agency says the world will continue to rely for decades.
But CCS is expensive and faces public scepticism concerning the possible leakage of CO2 stored over a long period of time. In addition, all projections show that it will not become commercially viable in time to contribute significantly to the EU's CO2 emissions reduction target for 2020.
For Norway, CCS is a technology that holds many promises. Awash with petrodollars since North Sea oil was first discovered off the Norwegian coast in 1971, it now hopes to lead the world into making fossil fuels cleaner for the 21st century.
"It is our vision that within seven years we will have put in place capture and storage technology," Norwegian Prime Minister Jens Stoltenberg said in January this year, officially launching a major new CCS pilot project at the Mongstad oil refinery, near Bergen. "This is a major project for our country. It is our moon landing," he said in reference to the US space programme launched in the 1960s.
The test facility currently under construction at Mongstad has the ambition to make Norway "a world leader in carbon management." "If we succeed, costs and risk for large-scale capture elsewhere could be greatly reduced," says Egil Sael, vice-president for business development at StatoilHydro, Norway's state-owned oil and gas company.
With emissions of carbon dioxide shooting up in Asia, where China builds new coal-fired plants nearly every week to fuel its booming economy, the return on investment could indeed be huge.
As a first step, the launch of a test facility, the European Carbon Dioxide Test Centre (TCM), is planned for 2008. If successful, the facility could then be deployed to full-scale in 2014 as a second step.
The Mongstad TCM is a small gas-fired power station generating heat and electricity simultaneously, a process which is already more energy-efficient than conventional gas-fired plants. The new technology to be tested there involves separating the CO2 from the other fumes emitted when burning the gas, using a process called Chilled Ammonia.
Lowering the cost of CO2 capture
But while it is more promising, the technique is considered riskier than an existing method using an amine solution to capture the CO2 after the gas is burned. "The risk lies in the fact that chilled ammonia is new and untested. On the other hand, the benefit could be very substantial if we succeed," Sael says. "This method has the potential to capture carbon dioxide with a considerably lower consumption of energy. That would reduce costs sharply."
The Norwegian energy ministry has invited a number of other companies to join the government and StatoilHydro in sharing the costs of the plant. Shell and Vattenfall will be among the six participants to share the facilities and intellectual property generated from the test centre.
Carbon storage pioneered at Sleipner since 1996
The reasons behind Norway's optimism on CCS lie in part on experience gained at the Sleipner gas platform off the Norwegian coast. Since 1996, StatoilHydro says it has already buried about 10 million tonnes of carbon dioxide in a sandstone formation 1,000 metres beneath the seabed. And it claims to add about 1 million tonnes to this volume every year, or the equivalent of CO2 emissions from 300,000 cars. It may be a drop in the ocean but the United Nations and the EU believe it can make a significant contribution to mitigating global warming in the future.
The roll-out of CCS at Sleipner was inspired by two things: a prohibitive carbon tax on offshore activities, introduced by Norwegian prime minister Gro Harlem Brundtland in 1991, and for commercial reasons as well - the natural gas at Sleipner West field contains 9% CO2 when clients required 2.5% maximum.
What Norway is now hoping for is official recognition of the Mongstad plant as one of the 12 large-scale demonstration projects that the EU plans to showcase by 2015.
But construction has been hampered because it is not yet clear whether the European Commission will allow government funding for the plant under its strict state aid rules. As a member of the European Economic Area, it is obliged to follow EU regulations.
"We are in the process of checking whether the project complies with EU state aid rules," says Ann-Kristin Hanssen, EU competition advisor for the Norway Mission to the EU in Brussels. She says environmental state aid guidelines provided by the Commission currently do not qualify CCS as an environmental project but an industrial one.
"The latest development gives us concern - that the EU's lack of environmental legislation and their regulations for state support will delay Mongstad," Minister of Petroleum and Energy Åslaug Haga told Aftenposten, a Norwegian newspaper. "At the moment there is considerable disagreement within the EU Commission about whether [CCS] is a good environmental measure. Time will tell."